Brexit will have an impact on how cross-border disputes between the continental entities and UK entities are conducted, affecting applicable law, jurisdiction and enforcement of judgments. According to the Withdrawal Agreement (which established the terms of the United Kingdom’s orderly withdrawal from the EU), the Regulation (EU) 1215/2012 on jurisdiction and enforcement of judgements will apply only if the statement of claim is filed with the court by the end of transition period, i.e. by 31 December 2020. The rules after 1 January 2021 are not known yet. If no new deal is agreed, the UK courts will not be part of European court system. There will be no cross-border recognition and enforcement of judgments with the UK any more.
Within the EU, the rules on which country’s courts have jurisdiction over a dispute are found principally in the Regulation (EU)1215/2012. This sets out an effective scheme for determining jurisdiction issues and avoiding multiple proceedings in different EU countries. In general, where parties have agreed that the courts of a particular EU member state should have jurisdiction, that court will have jurisdiction. Unless agreed otherwise, that jurisdiction will be exclusive, meaning no other court will have jurisdiction.
The general principle reflects the maxim Actor sequitur forum rei, or, he who acts (the plaintiff) must follow the forum (or jurisdiction) of the defendant. The Regulation introduced also special jurisdiction under which the plaintiff may sue the defendant, domiciled in another country in matters relating to a contract, in the courts for the place of performance of this contract. So, the UK firms could be sued in Poland (if the contract is supposed to be performed in Poland) and the Polish firms could be sued in the UK and – most importantly – the judgements will be enforceable in all EU countries. If the UK is not party to the Regulation (EU)1215/2012, this solution will not function any more. After 1 January 2021, the UK firms can only be sued in the UK and the Polish firms only in Poland.
Businesses should prepare in order to mitigate these risks. The shape of those preparations will depend upon the precise circumstances, the jurisdictions involved and the commercial objectives of the business.
Parties entering into contracts who are concerned about these issues should seek legal advice upfront on the risks involved and potential means of avoiding them. Dispute resolution clauses should not be treated as boilerplate. In the case of Polish-British contracts, Polish and UK law advice will be needed, for example, how easy it would be to enforce a UK judgment in Poland and vice versa.
Parties should take early legal advice on any dispute, to enable litigation strategy to be formulated. Strategy should be determined taking into account all risks.
It seems that all Polish companies trading with the UK should be changing the dispute resolution clause in their contracts into arbitration. This is the only sensible solution. The UK is and will continue to be the party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958. The enforcement of such awards is much simpler.
We have seen increased interest in international arbitration as a means of dispute resolution in light of Brexit, since enforcement of arbitral awards is unaffected by Brexit. Arbitration may therefore be a relatively low-risk option which parties may wish to consider, either when negotiating dispute resolution provisions in new contracts or if a dispute arises.
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